Managing the Unmanageable: Two Frameworks Explaining Business Evolution You Must Know About
I. Introduction
Every explanation of a pattern of behaviour starts with a philosophy or a way of making sense of the world in general and a phenomenon (or a class of phenomena) in particular. In business management, and since the early twentieth century, organisational theorists have tried to explain organisational behaviour and evolution through the cultural paradigms available at the time.
This article will examine two main frameworks: the classical framework epitomized by the works of Peter Drucker, Taiichi Ohno, and others, and the complexity theory-based framework championed by Dave Snowden, Ralph Stacey, and others. More specifically, we will look at how each framework deals with everyday situations that all organisations face and compare and contrast their methods and the assumptions behind them.
Strategic management, complex or simple?
The reason for undertaking this analysis is straightforward. As software professionals, we face situations and challenges daily and employ specific methods to solve complex problems associated with them. Sometimes, these methods do a great job; other times, not so much, and we must understand the root cause of the failure and what alternatives exist.
II. Business Management Schools of Thought
Countless books have been written on organisational theory and behaviour as well as business management (see References below for titles), and a few lines in an article on Operational Excellence in Software Development will hardly do this topic any justice. Therefore, we will confine ourselves to a few key ideas that are critical to understanding some of the (less technical) principles of operational excellence.
Classical Business Management
The pioneers of the early schools of business management, such as Peter Drucker, were practical and down-to-earth. They relied on social economics, historical analysis, and industrial engineering to understand organisations and how to run them—this period covered 1900-1950.
Systems Thinking
Another school of thought, Systems Thinking, based on the works of Herbert Simon, Russel Akoff, and others, emerged in the late 1950s and continued through the 1960s and 1970s. Its central idea was that “systems” such as organisations, economies, and living organisms cannot be understood by examining their parts or isolating them from their environment. The properties of the “system” are not the same as those of their parts and cannot be deduced from them.
Cybernetics
The story of Systems Thinking would not be complete without Cybernetics. Cybernetics is an interdisciplinary field that studies systems, particularly the processes of control and communication within those systems, whether biological, mechanical, social, or technological. Mathematician Norbert Wiener coined the term in his 1948 book Cybernetics: Or Control and Communication in the Animal and the Machine. It derives from the Greek word “kybernetes,” meaning “steersman” or “governor,” reflecting the idea of guidance and control.
Complex Adaptive Systems
Systems Thinking evolved further through the 1990s until the present day, giving rise to Complex Adaptive Systems (CAS) and Complexity Theory, which can be understood through the concepts of Nonlinearity, Emergence, Adaptation, and Self-organization.
Throughout that time, Toyota has been forging its way to become the largest car manufacturer in the world. We understand the principles of management at Toyota through the works of Jeffery K. Liker (author of The Toyota Way), James P. Womack, Daniel I. Jones, and Daniel Roos (authors of The Machine That Changed the World). What is striking in their analysis is the absence of most (if not all) of the above frameworks (Systems Thinking, Cybernetics, Complexity Theory).
To examine all four frameworks, Systems Thinking, Cybernetics, Complexity Theory, and The Toyota Way, would be beyond the capacity of a single blog post. Therefore, we decided to focus primarily on The Toyota Way and Complexity Theory, the latter being the latest installed in the series discussing systems and their dynamics. The objective of this article is, therefore, to try and answer the following questions:
Strategic management, theory vs practice?
The idea of modelling organisations as complex systems is very appealing, and its arguments are solid and grounded in theoretical and empirical evidence. On the other hand, we have a very successful organisation (Toyota) whose 14 principles overlap slightly with complexity theory but are primarily classical (belonging to the first school).
III. Comparing the Two Frameworks
The comparison will be done in several key areas that enterprises deal with daily. In each arena, we will examine the leading solution proposed by the two frameworks, The Toyota Way and Complexity Theory.
The information in the table below is gleaned from analysing the 14 principles of the Toyota Production System as described in the book “The Toyota Way” and from common knowledge of complexity science, especially the school championed by Dave Snowden, which he calls anthro-complexity.
1
Underlying Theoretical Framework
What is the theoretical framework used to model organisations and their dynamics?
Traditional methods of business management especially mass production, industrial engineering, quality control and management and operational excellence.
Organisations are modelled as complex adaptive systems (CAS) capable of adaptation, emergent behaviour and self-organisation.
2
Purpose and Meaning
What is the theoretical framework used to model organisations and their dynamics?
Benefiting society through meaningful contributions.
[No Equivalent]
3
Corporate Vision
Who sets the corporate vision and sees to its execution?
Corporate vision is set by top management, and, through operational excellence, managers and employees steer the enterprise towards that vision.
The future is unpredictable. There is no state of equilibrium (or external goals) towards which the organisation can gravitate. Abandoning platitudes and mission statements.
4
Sense-Making and Reality Construction
How is reality constructed and how does one make sense of their experiences?
Data is collected from the Genba or shop floor through Genchi Genbutsu (personal involvement or “go see for yourself”).
Reality is constructed through company narratives, or stories that people share around the watercooler about their experiences.
5
Hierarchies and Decision-Making
Who has the final word on strategic topics and how do groups decide on important matters?
Decisions are made top-down, but also by involving a broad range of people. Coaching instead of forcing solutions.
Self-organisation with boundaries, distributed ideation with centralised decision-making (or any other combination).
6
Planning and Strategy
How are long and short-term planning conducted?
7
Root-Cause Analysis
How are complex problems solved and root-cause analysis conducted?
Complex problem solving can be done through techniques such as “5 Whys” and the “Fishbone diagram”. It is assumed that causal relationships between events can be firmly established.
Causality is difficult to establish. Organisaitons gravitate towards strange attractors and far-from-equilibrium states. Many factors, drivers, and motivators co-evolve, influencing each other in both directions.
8
Solution-Finding
How are complex problems identified, articulated, and solved?
Solving complex problems at Toyota is done by exploring many alternatives and avoiding solutions from above.
In complexity theory, solving complex problems is done by conducting safe-to-fail experiments or by controlling “enabling constraints” and “governing constraints”.
9
Continuous Improvement
How can teams continuously improve their performance?
Challenging objectives, eliminating waste, Kaizen, Plan-Do-Check-Act (PDCA)
Enabling constraints, micro-interventions, fractal engagement.
10
Establishing Order
How is order established following a state of disorder such as a crisis?
Order is established and maintained through standardized processes, a conservative approach to change, and a healthy respect for authority.
Om complexity theory management, order is established by setting boundaries and implementing “governing constraints”.
11
Innovation
How do teams innovate?
[No Equivalent]
Innovation is induced by engineering chaos, exaptation, maximizing options, and being exposed to serendipitous situations.
12
Leadership
What is the difference between managers and leaders and what is the leadership’s primary responsibility?
Internally grow leaders who live the philosophy and understand the culture
Leaders must manage, and managers must lead. Leaders must manage the present and abandon hopes of controlling the long-term evolution of the organisation.
13
Quality Control
What are the best practices for quality control?
Built-in quality, visual controls, and one-piece flow to prevent issues from being hidden
[No Equivalent]
14
Warehouse Management
What are the best practices for warehouse management?
The 5S technique
[No Equivalent]
15
Design
How to design the best yet most affordable systems?
Getting feedback from many sources, possibly from experts outside the field
Agile design, designing for serendipity
16
Flow
How are people motivated so they are in the “flow”?
Flow is achieved through respect for people and providing them with meaningful jobs.
Changing the nature of people’s interactions rather than their mindsets.
17
Technology
What role does technology play?
Technology serving the customers and the processes
The interplay between technology and end users changes client preferences while the latter influences future investments in the former.
IV. Summary and Conclusion
Below are some conclusions we can derive from the two approaches summarized above:
Understanding these two frameworks is a starting point and a prerequisite to successfully investigating the behaviour of teams, groups, and organisations and making sense of one’s experience in each. Both are solid frameworks with plenty of evidence to support them.
These two frameworks are also essential in aiming for Operational Excellence, as they contain rich metaphors, guidelines, best practices, and practical methods for solving organizational issues.
V. References
- The Toyota Way – 14 Management Principles From the World’s Greatest Manufacturer — Jeffrey K. Liker
- Strategic Management and Organisational Dynamics — The Challenge of Complexity to Ways of Thinking About Organisations — Ralph Stacey
- HBR at 100 — The Most Influential and Innovative Articles from Hard Business Review’s First Century
- Cultures and Organisations — Software for the Mind — Geert Hofstede, Gert Jan Hofstede
- Organisational Culture and Leadership — Edgar Schein
- The Practice of Management — Peter Drucker
- The Evolution of Civilizations: An Introduction to Historical Analysis — Caroll Quigley
- The Machine That Changed the World — James P. Womack, Daniel I. Jones, Daniel Roos
- Systems Thinking, Volume 1 — F. E. Emery